Greetings. And welcome to the Kingstone Companies Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. It is now my pleasure to introduce your host, Jennifer Gravelle. Thank you, Ms. Gravelle. You may begin.

Thank you. And good morning, everyone. Thursday afternoon, the company issued a press release detailing Kingstone's third quarter 2023 results. On this call, Kingstone may make forward-looking statements regarding itself and its business. The forward-looking events and circumstances discussed on this call may not occur and could differ materially as a result of knowns and unknown risk factors and uncertainties affecting Kingstone. For more information, please refer to the section entitled factors that may affect future results and financial condition in Part 1, Item 1A of the company's Form 100-K for the year ended December 31, 2022, along with commentary on the forward-looking statements at the end of the company's earnings release issues on Thursday. In addition, our remarks today include references to non-GAAP measures. For a reconciliation of our non-GAAP measures to GAAP figures, please see the tables on our earnings release. And with that, I'd like to turn the call over to Kingstone CEO and President, Meryl Golden. Please go ahead, Meryl.

Thanks, Jen. And thanks for joining us this morning. First, let me again thank the board for giving me the opportunity to lead Kingstone as its CEO. I think it's important that we share more information with our investors and become more transparent to give you greater visibility as to the future. Our business is complicated, and I thought it could be explained better. So we've made further changes to our press release and 10-Q this quarter. Your positive feedback on the changes so far is much appreciated. As you know, Kingstone is in the midst of a transformation. Our strategy for the near term is to return to our roots as the premier writer of coastal property insurance in downstate New York, our core business, and we have been working hard to reduce our footprint outside of New York, our non-core business. As such, we've broken down our results between core and non-core, so that you can better understand the results of each segment. Please take your time going through the details contained in the press release and the 10-Q as you will see that the underlying core business is profitable, with a combined ratio of 96.4% for the quarter. Core premiums are growing, up just under 10% year-to-date. Core margins are expanding as average premiums are increasing and cost savings and efficiencies are taking hold. Non-core is shrinking, and by this time next year, the drag on our financials will be immaterial, if not gone. Kingstone is poised for a profitable 2024. For four years, I have talked about Kingstone 2.0, Kingstone 3.0, our employees have worked tirelessly to implement these strategies. They are now in place and at work. While I'll never say we are done, we have accomplished an incredible amount. I believe deeply in our…

Thank you, Meryl. For the third quarter of 2023, Kingstone recorded a net loss of $3.5 million or $0.33 per diluted share, improving from a net loss of $4 million or $0.38 per diluted share for the same period last year. The net written premiums were down 4.8% to $52 million, a decrease of $2.6 million from $54.6 million in the prior year period. Our core premiums were up 4.7% for the quarter, while non-core premiums declined by 43.9%. The net loss and LAE ratio was up 3.5 points from the prior year to 78.5%. The third quarter catastrophe losses added $2.2 million or 7.7 points to the net loss ratio for the quarter, an increase of 6.6 points on that unbooked catastrophe losses over the prior year. Most of the catastrophe losses were from a rain event that hit downstate New York particularly hard the last few days of September. The attritional or non-cat loss ratio was 70.8%, 1.6 points lower than the loss ratio in the third quarter last year. Let me emphasize the importance of our separating the core from non-core results. The core attritional loss ratio was 64.7% for the quarter, while the non-core attritional loss ratio was 112 5%. The improvement in our attritional loss ratio was driven by lower frequency, which is believed to be the result of better risk selection in our select product. In addition, we have been actively managing and reducing less profitable segments. These actions have been offset by a higher severity due to inflation as well as elevated number of large losses. For the third quarter, the net underwriting expense ratio decreased 5.2 points to 31.7%, the lowest in the company's history. This quarter's expense ratio reduction is due to decrease in most components of the company's expenses, as…

[Operator Instructions]. Our first question comes from Paul Newsome from Piper Sandler.

I was hoping you could give us a little bit more thoughts on the competitive environment in New York and whether or not it's getting better or getting worse [indiscernible]?

I would say that we are definitely in a hard market in downstate New York for coastal business. And I think it's going to continue. Our two largest competitors historically are no longer writing business. One is insolvent and the other has a moratorium on new business for about two years. The large multi-line competitors have pulled back even further due to reinsurance costs and other factors. So there definitely are a few companies writing coastal properties, but many fewer than in the past. And the brokers will tell you that it's the hardest market they've ever seen. So I view this as a huge opportunity for Kingstone. We're very comfortable with our pricing right now. We know our reinsurance costs. And our market share in New York is less than 2%. So we have a huge opportunity to increase our growth in downstate New York, and we hope to do that going forward.

Maybe a different topic. Can we talk about Kingstone's capital position. You increased a few losses along the way. And where do you stand from an [indiscernible] (00:14:23) capital ratio perspective? Where do you stand from an overall capital perspective, in your opinion?

Paul, our statutory numbers will be coming out in the middle of this week. But, again, some of the amounts of debt that we have on our books at the holding company level are actually surplus in the insurance carrier. And we continue to expect to see our RBC ratios above 300, for sure. And we are maintaining to that level. We do have a little bit of an underwriting loss for the quarter going into the statutory numbers as well. But we do expect to start having that turnaround here fourth quarter and the beginning of next year.

Our next question comes from Gabriel McClure [ph], who is a private investor.

Want to congratulate you for hitting your expense ratio? Very, very good. And I have one question for you, Meryl, and one for Jennifer. Meryl, you're referred to increasing the premiums on the New York Business 25%. So you didn't really break out on average how much that was and in rate and how much it was in replacement cost? So I was kind of curious if we had that. I guess we've heard that before. I think we heard that last year. And if you look at your press release, at the nine month to date, core losses excluding catastrophe on our underwriting were actually up on the losses about 3.4 points over 2022. So how do we know – I guess it's going to be different this time as far as making a better combined ratio on the core business going forward?

Let me answer your first question, which is the breakout between rates and replacement costs. So for that legacy homeowner book, about 16%, almost 17% of the increase had to do with the increase in replacement costs, and the rest had to do with rate changes. So then your question about losses. So what I can tell you for the quarter is that our frequency is down, which is really the leading indicator for what losses will be. So, our frequency is down, we believe, because we're writing a higher, a more responsible customer in our select program. And our select program currently is about 20% of our book and growing. And then also, we're reducing non-core business, which has a much higher frequency. But our severity is up double digit, just like the rest of the industry. And we are seeing claims inflation in our numbers. And in addition to that, as Jen mentioned, we have had an increase in the number of large losses this year. It's something we saw in every one of the quarters, and we're trying to figure out what is driving that. We have relooked at everything. We even hired an outside firm to take a look. And we really found nothing. And I've talked with others in the industry. And I'm hearing that they're seeing the same thing as well. But at the end of the day, we have now priced for this increased severity in our product, and so that, along with the decline in frequency, will result in a better loss ratio next year.

Jennifer, thanks for giving us the yield on the bond portfolio. What is the average maturity of our bond portfolio now?

4.3 years.

This concludes our question-and-answer session. I would like to turn the floor back over to Meryl Golden for closing comments.

Great. Thanks for joining us bright and early on Monday morning and have a fantastic day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.